HONG KONG—For 15 years, Cui Haifeng worked in China's manufacturing industry, stitching together leather to make soccer balls before working her way up to warehouse manager at a wood-flooring factory.
Last month the coal miner's daughter traded a past of factory uniforms for a blouse and skirt, training as a customer-service representative for a life insurer in Guangzhou, southern China's largest city.
The insurance industry "provides a more promising future and flexible working hours," says Ms. Cui, 34 years old, who grew up in central China's poor Henan province. "I want to earn more money to give my two kids a better and stable living environment."
Her experience mirrors a transition sweeping China. This year, service-related positions—such as those in retail, travel and leisure—for the first time will account for more of the country's gross domestic product than industrial-sector jobs, J.P. Morgan Chase JPM +0.15% predicts.
Government figures show the service sector created 37 million new jobs in the past five years, compared with 29 million in the industrial sector, which includes manufacturing, construction and mining.
Growing competition between the service and industrial sector for migrant workers like Ms. Cui is contributing to China's tightest labor market in years, putting upward pressure on wages that already are rising in the double digits annually. That is leading apparel manufacturers to shift some production out of China, although concerns about worker safety in countries such as Bangladesh are forcing factory owners to consider the risks of doing so.
Demand for urban workers in China exceeded supply by a record amount in the first quarter, according to the government. Meanwhile, the average monthly income for migrant workers rose 12.1% from a year earlier.
"There is no let up in the labor shortage," says Kelvin Lau, a senior economist Standard Chartered Bank. Manufacturers "are realizing that this is not a cyclical thing. It's not about riding out a storm."
Video [video]http://on.wsj.com/XbHJKP[/video]
Manufacturing companies are bypassing China and moving factories to cheaper locales in Southeast Asia. Lever Style's Stanley Szeto explains why his company is gradually moving production to Vietnam and Indonesia.
In southern China's industry-heavy Pearl River Delta region, nearly 90% of factory owners surveyed by Standard Chartered say the labor shortage will remain the same or get more severe this year.
Stronger growth for service-sector jobs signals that the government's long-promised transition from an industrial economy focused on exports to one led by domestic demand is under way. Creating jobs in hair salons and insurance companies, instead of in steel mills and soccer-ball factories, helps fuel growth in the world's second-largest economy.
But that offers little comfort to Top Form International Ltd. 0333.HK -3.08%
When the bra maker set up a factory in southeastern China's Jiangxi province more than a decade ago, hundreds of people lined up outside looking for work. Today, the manufacturer for Wonderbra and Elle Macpherson Intimates struggles to find enough workers to operate its production lines at full capacity.
For years Top Form competed for labor with factories moving inland to take advantage of lower costs. Now it loses workers to the mom-and-pop stores and karaoke bars that are springing up nearby.
"As some of these cities develop, the labor situation is going from bad to worse," says Chairman Willie Fung. The company, which is based in Hong Kong, loses up to 10% of its workforce each year after long holidays such as Lunar New Year. "Our [human resources] department has to call each and every employee to see why they're not coming back," he says.
The millions of migrant workers who are powering China's factories today increasingly have higher expectations for life and more job options, says Jian Chang, a China economist at Barclays BARC.LN +0.07% .
Dwight Nordstrom, chairman of Pacific Resources International, which manages 10 factories in China, says that unlike at other plants, his employees often work only 40 to 45 hours a week. They also get paid an average of 20% above the minimum wage.
Even so, Pacific Resources' Beijing factory, which makes parts for oil and gas burners, lost two promising hires in the past few months to the retail sector. While his company's overall benefits package, including insurance and free meals, was more valuable, the workers chose the retail jobs because of 40% higher take-home pay, Mr. Nordstrom says.
Pacific Resources' managers in the eastern city of Suzhou report tight competition for workers industrywide as three-star hotels and restaurants open up. Mr. Nordstrom says he is hopeful that since the company relies mostly on highly skilled workers—a quarter of its 1,000 employees are engineers—Pacific Resources' factories won't suffer as much as those that rely on low-skilled workers.
But for some people, the service industry will always be more appealing, even if the hours are longer or wages lower, says Willy Lin, chairman of the Textile Council of Hong Kong, a trade group. "You have a nice uniform to wear in a hotel, and if you tell your parents that you're working at reception, it sounds nicer," he says.
Ms. Cui, the newly minted customer-service rep, says she looks up to her colleagues at the insurance company because they travel for work and have saved enough money to buy apartments and cars. "Hopefully, I will [also] be able to buy an apartment sometime."
Arts, Entertainment News, Music, Film, Television, Opera & Ballet News at WSJ.com - Wsj.com
Last month the coal miner's daughter traded a past of factory uniforms for a blouse and skirt, training as a customer-service representative for a life insurer in Guangzhou, southern China's largest city.
The insurance industry "provides a more promising future and flexible working hours," says Ms. Cui, 34 years old, who grew up in central China's poor Henan province. "I want to earn more money to give my two kids a better and stable living environment."
Her experience mirrors a transition sweeping China. This year, service-related positions—such as those in retail, travel and leisure—for the first time will account for more of the country's gross domestic product than industrial-sector jobs, J.P. Morgan Chase JPM +0.15% predicts.
Government figures show the service sector created 37 million new jobs in the past five years, compared with 29 million in the industrial sector, which includes manufacturing, construction and mining.
Growing competition between the service and industrial sector for migrant workers like Ms. Cui is contributing to China's tightest labor market in years, putting upward pressure on wages that already are rising in the double digits annually. That is leading apparel manufacturers to shift some production out of China, although concerns about worker safety in countries such as Bangladesh are forcing factory owners to consider the risks of doing so.
Demand for urban workers in China exceeded supply by a record amount in the first quarter, according to the government. Meanwhile, the average monthly income for migrant workers rose 12.1% from a year earlier.
"There is no let up in the labor shortage," says Kelvin Lau, a senior economist Standard Chartered Bank. Manufacturers "are realizing that this is not a cyclical thing. It's not about riding out a storm."
Video [video]http://on.wsj.com/XbHJKP[/video]
Manufacturing companies are bypassing China and moving factories to cheaper locales in Southeast Asia. Lever Style's Stanley Szeto explains why his company is gradually moving production to Vietnam and Indonesia.
In southern China's industry-heavy Pearl River Delta region, nearly 90% of factory owners surveyed by Standard Chartered say the labor shortage will remain the same or get more severe this year.
Stronger growth for service-sector jobs signals that the government's long-promised transition from an industrial economy focused on exports to one led by domestic demand is under way. Creating jobs in hair salons and insurance companies, instead of in steel mills and soccer-ball factories, helps fuel growth in the world's second-largest economy.
But that offers little comfort to Top Form International Ltd. 0333.HK -3.08%
When the bra maker set up a factory in southeastern China's Jiangxi province more than a decade ago, hundreds of people lined up outside looking for work. Today, the manufacturer for Wonderbra and Elle Macpherson Intimates struggles to find enough workers to operate its production lines at full capacity.
For years Top Form competed for labor with factories moving inland to take advantage of lower costs. Now it loses workers to the mom-and-pop stores and karaoke bars that are springing up nearby.
"As some of these cities develop, the labor situation is going from bad to worse," says Chairman Willie Fung. The company, which is based in Hong Kong, loses up to 10% of its workforce each year after long holidays such as Lunar New Year. "Our [human resources] department has to call each and every employee to see why they're not coming back," he says.
The millions of migrant workers who are powering China's factories today increasingly have higher expectations for life and more job options, says Jian Chang, a China economist at Barclays BARC.LN +0.07% .
Dwight Nordstrom, chairman of Pacific Resources International, which manages 10 factories in China, says that unlike at other plants, his employees often work only 40 to 45 hours a week. They also get paid an average of 20% above the minimum wage.
Even so, Pacific Resources' Beijing factory, which makes parts for oil and gas burners, lost two promising hires in the past few months to the retail sector. While his company's overall benefits package, including insurance and free meals, was more valuable, the workers chose the retail jobs because of 40% higher take-home pay, Mr. Nordstrom says.
Pacific Resources' managers in the eastern city of Suzhou report tight competition for workers industrywide as three-star hotels and restaurants open up. Mr. Nordstrom says he is hopeful that since the company relies mostly on highly skilled workers—a quarter of its 1,000 employees are engineers—Pacific Resources' factories won't suffer as much as those that rely on low-skilled workers.
But for some people, the service industry will always be more appealing, even if the hours are longer or wages lower, says Willy Lin, chairman of the Textile Council of Hong Kong, a trade group. "You have a nice uniform to wear in a hotel, and if you tell your parents that you're working at reception, it sounds nicer," he says.
Ms. Cui, the newly minted customer-service rep, says she looks up to her colleagues at the insurance company because they travel for work and have saved enough money to buy apartments and cars. "Hopefully, I will [also] be able to buy an apartment sometime."
Arts, Entertainment News, Music, Film, Television, Opera & Ballet News at WSJ.com - Wsj.com
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